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Microsoft Should Sell Off Bing, Xbox, Analyst Says

by Brandon Dimmel on May, 30 2013 at 08:05AM EDT

What's the best way for Microsoft to improve its financial outlook? Sell off two prominent properties: its Xbox video game division and its Bing search engine. At least, that's the opinion of Rick Sherlund, an analyst for Nomura Equity Research.

In a report released earlier this week, Sherlund argues that selling off the Xbox and Bing properties could help Microsoft from a financial standpoint.

Bing Division Consistently in the Red

First, selling Bing does make some sense. After several years competing with industry heavyweight Google, Microsoft's online services division continues to report losses. It's unlikely that's about to change any time soon.

However, the Xbox story is a very different one. In fact, Microsoft's video game division continues to be one of the Redmond, Washington-based firm's most consistently successful properties, generating impressive revenue for several straight years.

It's possible that revenue will only increase with the release of the Xbox One. Microsoft's newest console -- which features an impressive eight-core processor, 8GM RAM, the Kinect hands-free gaming peripheral and a Blu-ray drive -- is due out later this year.

But for Sherlund selling the Xbox property now could help Microsoft generate enough revenue to focus on areas where it truly excels. (Source: geekwire.com)

Analyst: Sell Xbox, Redirect Revenue to Windows, Office

After all, even though Xbox generates impressive revenue for Microsoft, its profits are nothing compared to those generated by the firm's Server and Tools business (including Windows Server), Windows, and the Business Services Division (including the Microsoft Office suite).

"Xbox is one of the areas of success for Microsoft and is cool to consumers, but it is perhaps time to assess whether this can ever be material to the overall company and might be more leveragable to a consumer-oriented company such as Samsung," Sherlund notes in his report.

"Shareholders might want to know if they could possibly be better off if Xbox were spun out as a separate company or sold. Either way, it is not that material to the overall valuation of Microsoft and will not likely determine the success of Microsoft going forward."

In the end, Sherlund feels Xbox is "just not profitable enough to move the needle that much at the company." (Source: pcworld.com)